Naomi owned an inventory of widgets worth $100 000.She purchased $40 000 worth of property insurance from Huron Insurance Co.That policy contained a co-insurance clause that required at least 80 percent coverage.A flood caused extensive damage to Naomi's widgets.Naomi will be entitled to receive a benefit of $20 000 if the flood caused damage worth

Question

Quizplus · Accepted Answer

According to the co-insurance clause, Naomi needs to have at least 80% coverage of the value of her inventory, which is $100 000. 80% of $100 000 is $80 000. Since she purchased $40 000 worth of insurance, she has 50% coverage. Therefore, the policy will only cover 50% of the damages. If the flood caused damages worth $40 000, Naomi would be entitled to receive a benefit of $20 000, which is 50% of the damages. Therefore, the correct answer is C) $40 000.

Naomi Owned an Inventory of Widgets Worth $100 000